Can a publisher use crowdfunding to replace ads?

We have already seen Kickstarter, the popular crowdfunding platform, used to finance some fairly interesting media experiments, including books from authors like Seth Godin, record albums by artists like Amanda Palmer and even an entire magazine in the case of Matter. But could a publisher use the service to crowdfund its way out of the advertising-revenue trap in which many media companies find themselves? Penny Arcade, which publishes online comics and puts on related events, is trying to do exactly that with an ambitious Kickstarter campaign aimed at replacing the revenue it currently gets from advertising with funding from fans. But will it work? And could it provide a model for other media companies?

Penny Arcade is anything but a traditional publisher: It began as a simple video-game-oriented webcomic that writer Jerry Holkins and artist Mike Krahulik posted semi-regularly online in the late 1990s, and it has become a regular series with a number of associated real-world products (including several video games) and its own gaming conference called PAX. It is one of the longest-running webcomics around, and Holkins and Krahulik have made their living by publishing it for the past several years — in part by running advertising on the site where the comics appear.

Returning to a reader-centric model

In the early days of the comic, Holkins says the two founders managed to run everything through direct donations and sales of related products, but as the site grew bigger they figured they had to sell out and offer advertising in order to survive. But in the description of the Kickstarter campaign and a related blog post, he said eventually he and Krahulik wondered whether the platform would allow them to raise enough money to go back to a fully reader-funded model:

I think we had assumed it wasn’t possible to do it that way anymore — to operate a site at this scale without advertising dollars — but it occurred to us that we’d never actually asked. People often want to know how they can support the site in a way that doesn’t involve t-shirts or looking at advertising, and I think we may have a way. What I’m saying is that we want to sell out, and we would love to sell out to you.

The initial goal for the campaign, which ends on Aug. 15, is to raise $250,000, which the two founders say will allow them to dispense with banner advertising. If more money is raised, Holkins says the two will “restore old services we used to offer, convert the entire site to a Creative Commons license, and ultimately remove every ad from the site for an entire year.” The Penny Arcade founder says the larger idea behind the campaign is to become a company “that succeeds by making things, specifically things for you.”

The two co-founders have also made it fun for participants in the Kickstarter fund-raising effort by including bizarre or unusual offers as part of the different tiers of funding. So the $1 pledge says one character “will shout out your name as he chases a duck” and for $25 or more, another “will name your pet.” Higher pledge amounts come with a chance to be one of 50 people on the set when Penny Arcade films a movie version of the comic, and for a $5,000 donation a fan gets to come to Penny Arcade headquarters and hang out for an evening of pizza and games with the creators and other staff.

Could other publishers follow this model?

One of the people watching the campaign is Rob “Commander Taco” Malda, who founded the online community Slashdot and is now working on digital projects for the Washington Post and mentioned it on Twitter and his Google+ page. Could a Kickstarter campaign have saved Slashdot from having to be sold multiple times to different companies as it tried to keep the servers behind the community running? It’s an interesting question. Crowdfunding seems to have become so well established that it could theoretically give website publishers a lot more financial freedom.

The Penny Arcade experiment has a humorous tone, but the intent behind it is a serious one. By turning to its readers, Penny Arcade wants to become a totally reader-centric business that answers only to its fans and supporters. In some ways it’s the ultimate extension of the model the New York Times and other traditional publishers have taken with paywalls and other subscription plans, except Penny Arcade has come at it from the opposite direction: Instead of hitting readers with a paywall when they try to read something, it is asking for funding up front before the content has even been created.

Targeted publications like the Financial Times and the Economist seem to already be on the road toward this kind of model, with subscriptions surging ahead of advertising to make up more than half of the revenues at the FT in a recent period. Is this a model other media entities could pursue? Perhaps. But they would need to have as devoted a fan base as Penny Arcade, which by late Tuesday had already come up with almost a third of the amount the site was looking for in less than 24 hours.